THE HON'BLE THE ACTING CHIEF JUSTICE SRI PINAKI CHANDRA GHOSE AND THE HON'BLE SRI JUSTICE VILAS V. AFZULPURKAR WRIT APPEAL NO.893 OF 201.12-9-2012 M/s. India Finlease Securities Limited,Chennai, Rep. by its Authorized Signatory Sri P.D. Prasad Indian Overseas Bank Represented by its Branch Manager Andhra Loyola College Branch, Vijaywada Krishna District and others COUNSEL FOR PETITIONER: Sri D. Prakash Reddy, Senior Counsel, appeared for Sri C. Ramachandra Raju COUNSEL FOR RESPONDENT NOs.1 AND 2.Sri A. Krishnam Raju COUNSEL FOR RESPONDENT NO.3: Sri B. Adinarayana Rao, appeared for Sri Challa Gunaranjan GIST HEAD NOTE: CITATIONS:
1. (1977) 3 SCC 24.2. (2004) 4 SCC 31.3. (2007) 5 SCC 74.4. (1991) 3 SCC 58.5. AIR 200.Madras 108(1) 6. 2005 Company Cases Vol.125, P.676 7. (2010) 8 SCC 11.8. AIR 195.SC 37.
JUDGMENT: (Per the Hon'ble the Acting Chief Justice) Whether under sub-section (8) of Section 13 of the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (Act 54 of 2002) (hereinafter referred to as 'the Securitization Act") a borrower is permitted to redeem the immovable secured asset after the secured asset was sold but before the confirmation of sale by the secured creditor under the Security Interest (Enforcement) Rules, 2002 (hereinafter referred to as 'the Rules') is the question involved in this appeal filed by the auction purchaser under Clause 15 of the Letters Patent challenging the order of the learned single Judge opining that the borrower is entitled to redeem the immovable secured asset before the confirmation of sale.
2. Facts leading to the controversy may briefly be noted: Respondent No.3 herein - M/s Sruthi Builders Private Limited - secured loan from the respondent- banks - Indian Overseas Bank, Andhra Loyola College Branch, Vijayawada and Dena Bank, Vijayawada Branch, Governorpet, Vijayawada respectively. When Respondent No.3 has become a non-performing asset recourse was taken to the provisions of the Securitization Act and accordingly a tender notification was issued on 27.2.2012 for sale of the immovable secured asset of the borrower and the date for auction was fixed as 31.3.2012. The borrower requested for one time settlement on 29.3.2012 by paying Rs.1.00 crore and Rs.27.00 lakhs to the respondents-banks respectively, but they proceeded with the auction. The auction purchaser - M/s India Finlease Securities Ltd., Chennai has become the highest bidder for Rs.18.00 crores for the secured asset i.e "Sainag Complex" Chandramoulipuram, Vijayawada. The Authorized Officer, Dena Bank and the Authorized Officer, Indian Overseas Bank jointly issued letter dated 31.3.2012 accepting the auction purchaser as the highest bidder and directing the purchaser to pay the balance of 25% after deducting EMD amount by 3.4.2012 and the balance bid amount of Rs.1350 lakhs on or before 16.4.2012. It was indicated in the letter that the sale shall be confirmed in the name of M/s India Finlease Securities Ltd., on payment of the entire bid amount subject to confirmation by the banks. The purchaser paid Rs.2.93 crores by cheque dated 3.4.2012 in favour of Dena Bank. In the meanwhile, the borrower, aggrieved by the auction filed S.A.No.139 of 2012 before the Debt Recovery Tribunal, Visakhapatnam under Section 17 of the Act. The respondent-banks filed counters and as per the directions of the DRT a statement of account showing the amount due by the borrower was also filed. The auction purchaser has paid the balance amount- Rs.11.70 crores by demand draft dated 12.4.2012 and Rs.1.80 crores by bankers cheque dated 13.4.2012, both in favour of Dena Bank. Both the amounts were accepted by the bank subject to the outcome of S.A.No.139 of 2012 on the file of DRT, Visakhapatnam. It was also indicated that confirmation of sale shall also be only subject to the outcome of S.A.No.139 of 2012. On 16.8.2012, the borrower filed an interlocutory application under section 13(8) of the Securitization Act to permit it to redeem the secured asset by discharge of the debt due to the respondent banks. By order dated 16.4.2012, the DRT allowed the application permitting the borrower to pay the amounts within five weeks as undertook by the borrower in the affidavit filed before the DRT and in default liberty was given to the respondent-banks to confirm the sale in favour of the successful highest bidder and the banks were directed to maintain status quo as on the date. So far as the amounts paid by the auction purchaser is concerned, the DRT directed that the same shall be kept in an interest bearing account in the form of term deposit, if agreed upon by the auction purchaser. Accordingly, it appears that the 2nd respondent wrote a letter to the auction purchaser to convey their approval for keeping the bid amount in term deposit as per the directions of the DRT. On 18.6.2012, the 1st respondent bank filed a memo before the DRT stating that the borrower paid the entire amount due of Rs.9,96,50,579/- by 20.5.2012. The borrower also filed a memo to dismiss the S.A as not pressed since the entire loan liability has been discharged. The IOB issued no due certificate and the Dena bank is yet to issue no due certificate.
3. At this stage, the appellant-auction purchaser filed Writ Petition No.16254 of 2012 on 4.6.2012 without impleading the authorized officers of the banks and the borrower for a direction to the respondent-banks to execute sale deed in favour of the appellant or its nominees and register the same in respect of the property in question and for a further direction to pay a sum of Rs.10.00 lakhs to the appellant towards damages for the delay of each day in executing the sale deed in favour of the appellant by declaring the inaction of the respondents-banks in executing the sale deed in spite of the payment of the amount by 13.4.2012 is unjust, contrary to the terms and conditions of auction notice and violative of Articles 14 and 21 of the Constitution of India.
4. The DRT by order dated 18.6.2012 disposed of the S.A observing that the borrower has a right to exercise his right of redemption before the date of sale or transfer and once the amount has been paid and the same having been accepted by both the banks, the applicant is well within it's right to exercise the right of redemption. Though a prayer was made by the auction purchaser to implead it as party to the proceedings the same was rejected. Accordingly, the matter was disposed of directing the banks to issue no due certificate and to return the title deeds to the borrower. The auction purchaser along with his advocate appeared before the DRT and prayed for impleadment, but the prayer was rejected on the ground that such a request should have been made earlier and that the auction purchaser has already filed the writ petition before the High Court.
4. During the pendency of the writ petition, the borrower was permitted to come on record. The respondents-banks and the borrower filed counter-affidavits detailing the proceedings before the DRT and the directions issued by the Tribunal.
5. Before the learned single Judge it was argued on behalf of the appellant that the creditor banks after having received the total bid amount from the appellant ought not to have received any payment from the borrower after the sale was over as the borrower has no right for redemption of the secured asset after the auction was over and the order passed by the DRT is without jurisdiction. It was further contended that under section 13(8) of the Securitization Act, the borrower has got right of redemption only up to conducting of auction, but not later, since the auction was concluded on 31.3.2012, before which date no payment was made, the borrower has no right to redeem the secured asset. On behalf of the creditor banks it was argued that the borrower moved S.A.No.139 of 2012 even before the auction purchaser deposited the balance sale consideration and therefore the banks received the balance sale consideration subject to the result of S.A.No.139 of 2012. The borrower paid the entire dues and the same has been recorded by the DRT and the property came to be redeemed as per the order of the DRT dated 16.4.2012. It was contended on behalf of the borrower that the borrower has exercised his right to redeem the property well before the sale was confirmed by the secured creditor and the interpretation sought to be put forth by the auction purchaser to sub-section (3) of Rule 13 is not correct.
6. On a consideration of the rival submissions, the learned single Judge by order dated 25.6.2012, placing reliance on the decision of the Supreme Court in Narandas Karsondas v. S.A. Kamtam1 and Mardia Chemicals Ltd. V. Union of India2 wherein it was held that the mortgagor has right to redeem unless the sale of the property was complete by registration in accordance with the provisions of the Registration Act, came to the conclusion that since the acceptance of the amount by the auction purchaser was subject to the outcome of the proceedings before the DRT, confirmation of sale cannot be made absolute and the creditor banks cannot be compelled to execute registered sale deed in respect of the mortgaged property which has already been redeemed by the borrower. However, the learned Judge held that since the auction purchaser paid the entire amount, the auction purchaser is entitled for some compensation and accordingly awarded damages quantified at Rs.5.00 lakhs and directed creditor banks and the borrower to pay the same as compensation to the auction purchaser in equal proportion. The appellant-writ petitioner also filed Rev.WPMP.No.26312 of 2012 which was dismissed by the learned single Judge by order dated 10.7.2012.
7. Aggrieved by the order of the learned single Judge, the auction purchaser has filed the present appeal.
8. Learned counsel appearing for the auction purchaser submitted that under sub-section (8) of Section 13 of the Securitization Act, the borrower is entitled to redeem the property by depositing the entire amount due together with all costs etc. only "before the date fixed for sale" but not later, therefore, the learned Judge ought to have held that receipt of the amount by the respondent-banks from the borrower after the date of auction has no legal sanctity and does not affect the sale in favour the auction-purchaser. Section 13(8) clearly provides that the borrower has right to pay the amount only before the date fixed for sale and he cannot be permitted to exercise this right after a particular date i.e. date fixed for sale. There is an emphasis in the wording 'before the date fixed for sale' fixing the parameter. Therefore, there is no ambiguity at all in the language of the section. After making full payment within the stipulated time under Rule 9(4), confirmation of sale that took place on 31.3.2012 under Rule 9(2) holds good and no further confirmation of sale is required. Learned counsel further submitted that the reference of confirmation of sale under Rule 9(6) does not mean that the sale has to be again confirmed for second time. He submitted that the respondent-banks having received the entire amount before the due date ought to have issued the sale certificate as per Rule 9(6) of the Rules. The respondent-banks confirmed the sale on 31.3.2012 and therefore the sale was deemed to have been confirmed as per Rule 9(2) of the Rules. When the sale in favour of the purchaser was not set aside by the DRT or by the respondent-banks, the respondent-banks are not justified in not issuing a sale certificate in favour of the appellant and the sale certificate shall be deemed to have been issued in favour of the appellant on 13.4.2012. Learned counsel further submitted that the learned single Judge is not justified in holding that acceptance of the payment by the respondent-banks is a conditional one. The learned Judge ought to have held that the orders dated 16.4.2012 and 18.6.l2012 passed by DRT are non est and not binding on the appellant as the said orders were obtained without making the appellant as party to the appeal before the Tribunal. The decisions of the Supreme Court in Narandas Karsondas v. S.A. Kamtam and Mardia Chemicals Ltd. v. Union of India have no application to the case of the appellant. Once the sale is confirmed on 31.3.2012 the sale is over and the appellant has become the absolute owner. The sale certificate does not form part of the sale transaction as it does not require any registration. The sale certificate contemplated in an auction of statutory authority is totally different from that of a registered sale deed in a private sale and placed reliance on the decisions of the Supreme Court in B. Arvind Kumar v. Government of India and others3 and Sagar Mahila Vidyalaya, Sagar v. Pandit Sadashi Rao Harshe and others4 contending that once the sale is confirmed the sale becomes absolute and the auction purchaser has got a vested right in the property, whether the sale certificate is issued or not. The Supreme Court also held that the sale certificate does not require any registration and as such issuance of sale certificate has no significance at all to decide the question whether sale is completed or not. Reliance has also been placed on the decision of the Madras High Court in K. Chidambhara Manickam v. Shakeena and others5.
9. The learned counsel appearing for the respondents-bank submitted that the borrower approached the DRT even before the auction purchaser deposited the balance sale consideration and as per the directions of the Tribunal, the banks accepted the payments made by the borrower. He placed reliance on the decision of the Bombay High Court in Manoj D. Kapasi and another v. Union of India6 wherein the Bombay High Court following the judgment of the Supreme Court in Mardia Chemicals Ltd.'s case held that the right of redemption was a statutory right available to the borrower till the transfer took place and as such the learned single Judge has rightly appreciated the provisions. He further submitted that the bid was accepted subject to confirmation by the banks and while receiving the balance 75% bid amount it was clearly mentioned that the payment was received subject to the outcome of proceedings before the DRT. The decision of the Madras High Court in K. Chidambhara Manickam v. Shakeena and others has no application because in the said case sale certificate has been issued, but in the instant case no sale certificate was issued. He further submitted that the writ petition is not maintainable inasmuch as the appellant is entitled to file a petition under Section 17 of the Securitization Act if he is aggrieved and placed reliance on the decision of the Supreme Court in United Bank of India v. Stayavathi Tandon7 wherein the apex Court held that a writ Court shall not entertain petition under Article 226 unless there are exceptional circumstances. Learned counsel further submitted that the auction purchaser is entitled only for a sale certificate as per Rule 9(6) of the Rules and there is no provision either under the Securitization Act or the rules made thereunder empowering the bank to execute sale deed in favour of the auction purchaser and therefore no direction to execute a sale deed can be issued. Respondents 1 and 2 have brought to the notice of the Tribunal all the transactions and the Tribunal after considering the same passed orders permitting the borrower to pay the amounts within a period of five weeks which have been complied with by the borrower. The learned single Judge has rightly appreciated the facts and Section 13(8) of the Act and declined to grant the relief, therefore, no interference is warranted.
10. Learned counsel appearing for the 3rd respondent submitted that when the respondent-banks issued a notice for sale of the property, the 3rd respondent by letter dated 29.3.20112 requested the respondent-banks for one time settlement and to show bona fides paid Rs.1.00 crore to the 1st respondent and Rs.27.00 lakhs to the 2nd respondent, but the banks without considering the same proceeded to open the bids on 31.3.2012. Under those circumstances, 3rd respondent was compelled to approach DRT on 3.4.2012 by filing S.A.No.139 of 2012 and the 3rd respondent complied with the directions of the DRT dated 16.4.2012 and paid the amounts due. Referring to Rule 9(2) of the Rules and the conditions of auction notification, learned counsel argued that confirmation of sale by the "secured creditor" is mandatory and the appellant is not correct in contending that sale automatically becomes confirmed on payment of the balance of sale consideration. Further, on confirmation of sale by the secured creditor only, the Authorized Officer has to issue a certificate of sale of immovable property in favour of the purchaser as required under rule 9(6) of the Rules. He also submitted that the Judgment of the Madras High Court in K. Chidambhara Manickam v. Shakeena and others has no application to the present case. Referring to sub-section (8) of Section 13 learned counsel submitted that the interpretation sought to be put forth by the appellant is contrary to the intendment of the Legislature. Right to get redemption of the property can be exercised at any time before the date fixed for 'sale' or 'transfer' and that right of redemption is available till the 'transfer' is effected. He strenuously argued when the Legislature has designedly used the expression 'sale or transfer' the word 'transfer' cannot be ignored for considering the import of Section 13(8). In K. Chidambhara Manickam v. Shakeena and others the Court has not taken into consideration the same. In the instant case, the borrower has exercised his right of redemption before the transfer of property is effected. A transfer can validly be made only on confirmation of sale by the secured creditor and issuance of a sale certificate by the authorized officer. Since there is neither confirmation of sale nor the appellant was issued sale certificate, learned counsel argued, that there was no valid transfer within the meaning of sub-section (8) of Section 13 and as such the appellant is not entitled for the relief prayed for. In Manickam's case, the Court has also not gone into the effect of confirmation of sale by the secured creditor. Learned counsel further submitted that the banks have received the amounts from the auction purchaser only subject to the outcome of the proceedings pending before the DRT and in the document relating to 'details of auction participants' dated 31.3.2012 accepting the bid of the appellant it was clearly indicated that the banks reserve their right to cancel/modify the sale before confirmation of the same. The decisions relied upon by the appellant have no application to the present case. He submitted that even under the provisions of the Transfer of Property Act, there is a requirement of confirmation of auction and issuance of sale certificate. In Sagar Mahila Vidyalaya, Sagar v. Pandit Sadashi Rao Harshe and others relied upon by the learned counsel for the appellant, the Supreme Court held that issuance of sale certificate is only a ministerial act and the title vests in the auction purchaser as soon as sale is confirmed. In the present case, there is no confirmation of sale by the secured creditor and as such there is no transfer of sale. In K. Chidambhara Manickam vs. Shakeena and others the Court has not taken into account the decisions of the Apex Court in Arvind Kumar's case and Sagar Mahila Vidyalaya's case. He, therefore, submitted that since the borrower has redeemed the property in accordance with sub-section (8) of Section 13 before the sale was confirmed by the secured creditor, the appellant is not entitled for the relief which was rightly rejected by the learned single Judge and prayed for dismissal of the appeal.
11. Before we deal with the issues, we may briefly refer to the relevant provisions of the Securitization Act and the Rules made thereunder. Chapter III of the Act deals with Enforcement of Security Interest. Sub-section (1) of Section 13 provides that any security interest created in favour of any secured creditor may be enforced without the intervention of the Court or Tribunal by such creditor in accordance with the provisions of the Act. Sub-section (2) of Section 13 provides that where a borrower makes any default in repayment of secured debt and where the account in respect of such debt is classified by the secured creditor as a non-performing asset, the secured creditor may require the borrower by notice in writing to discharge in full his liabilities to the secured creditor within sixty days from the date of notice failing which the secured creditor shall be entitled to exercise all or any of the rights under sub-section (4). Sub-section (4) provides that where the borrower has failed to discharge his liability in full within the period specified in sub-section (2), the secured creditor may take recourse to one or more measures of the following to recover his secured debt, namely,: (a) take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset; (b) take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset. However, the right to transfer by way of lease, assignment or sale shall be exercised only where the substantial part of the business of the borrower is held as security for the debt. Sub-section (8) of Section 13 which is relevant for our purpose may be quoted below: "(8) If the dues of the secured creditor together with all costs, charges and expenses incurred by him are tendered to the secured creditor at any time before the date fixed for sale or transfer, the secured asset shall not be sold or transferred by the secured creditor, and no further step shall be taken by him for transfer or sale of the secured asset." 12. Rule 9 of the Rules deals with time of sale, issue of sale certificate and delivery of possession etc. Rule 9 to the extent relevant reads as under: (1) No sale of immovable property under the rules shall take place before the expiry of thirty days from the date on which the public notice of sale is published in newspapers as referred to in the proviso to sub-rule (6) of Rule 8 or notice of sale has been served to the borrower. (2) The sale shall be confirmed in favour of the purchaser who has offered the highest sale price in his bid or tender or quotation or offer to the authorized officer and shall be subject to confirmation by the secured creditor. Provided that no sale under this rule shall be confirmed, if the amount offered by sale price is less than the reserve price, specified under sub-rule (5)of Rule 9. Provided further that if the authorized officer fails to obtain a price higher than the reserve price, he may, with the consent of the borrower and the secured creditor effect the sale at such price. (3) On every sale of immovable property, the purchaser shall immediately pay a deposit of twenty-five per cent of the amount of the sale price, to the authorized officer conducting the sale and in default of such deposit, the property shall forthwith be sold again. (4) The balance amount of purchase price payable shall be paid by the purchaser to the authorized officer on or before the fifteenth day of confirmation of sale of the immovable property or such extended period as may be agreed upon in writing between the parties. (5) In default of payment within the period mentioned in sub-rule (4), the deposit shall be forfeited and the property shall be resold and the defaulting purchaser shall forfeit all claim to the property or to any part of the sum for which it may be subsequently sold. (6) On confirmation of sale by the secured creditor and if the terms of payment have been complied with, the authorized officer exercising the powers of sale shall issue a certificate of sale of the immovable property in favour of the purchaser in the Form given in Appendix V to these rules.
13. From the above it is clear that where the borrower fails to discharge the liability of the secured creditor within sixty days of notice as provided in sub-section(2) of Section 13 of the Act, under sub-section (4) the secured creditor may take possession of the secured assets of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset and has also power to take over the management of the business of the borrower including the right to transfer by way of lease, assignment or sale for realizing the secured asset. Therefore, the 'sale' contemplated under sub- section (8) of Section 13 is by way of transfer of the secured asset.
14. Rule 8 of the Rules provide for sale of immovable secured assets. Sub-rule 6 of Rule 8 provides that sale of secured asset shall be effected by either inviting tenders from the public or by holding public auction after serving a notice of thirty days on the borrower. However, sub-section (8) of Section 13 provides that if the borrower tenders to the secured creditor all the dues of the secured creditor together with all costs, charges and expenses incurred by him at any time before the date fixed for sale, then secured asset shall not be sold. If the borrower fails to repay dues together with all costs, charges and expenses incurred by the secured creditor before the date fixed for sale, then the secured creditor will proceed further in the matter. According to the learned counsel for the appellant, if the borrower has failed to redeem the secured asset before the date fixed for sale and the sale is concluded, the borrower has no further right to redeem the secured asset and sale is deemed to have been confirmed in favour of the auction purchaser. Learned counsel for the appellant vehemently contended that the intention of the Legislature in selectively using the words 'before the date fixed for sale' is that the borrower shall not be permitted to exercise his right after a particular date i.e the date fixed for sale. We are not inclined to accept such interpretation. If the sale is deemed to have been confirmed in favour of the purchaser on failure of the borrower to pay the amount before the date fixed for sale, then there is no need for the Legislature to incorporate the words 'transfer' and 'transferred' in sub-section (8) of Section 13. If such a construction is accepted, incorporation of the words 'transfer' and 'transferred" in sub-section (8) of Section 13 and 'confirmation of sale by the secured creditor' referred to in sub-rules (2) and (6) of Rule by the Legislature would be insignificant. Sub-section (8) of Section 13, in our view, permits two contingencies where the borrower has a right to redeem the property. "At any time before the date fixed" cannot be said to be exclusively intended for 'sale' only, it was intended to be applied to 'transfer' also. Otherwise, there is no meaning in employing the words 'transfer' and 'transferred' in sub-section (8). Under the first contingency, if the borrower tenders the dues of the secured creditor together with all costs, charges and expenses incurred at any time before the date fixed for sale, then the secured asset shall not be sold in the auction. However, if the borrower failed to tender the dues before the date fixed for sale, the authorized officer will proceed further in the matter. However, the right of the borrower to redeem the property thereafter is not extinguished. He has still the right to redeem the property but at any time before the date fixed for transfer of the property. So long as the sale is not confirmed by the secured creditor as required under the Rules, the right of the borrower to redeem the property under the second contingency is not taken away. He has a right to redeem the property before the confirmation of the sale by the secured creditor under the Rules. Mere sale is not enough to conclude that the property is transferred to the purchaser. From a reading of Clause (a) of sub-section (4) of Section 13, it is clear that the secured creditor has the right to transfer the secured asset by way of lease, assignment or sale. Therefore, sale will be complete by transfer of property either by confirmation of sale by written proceedings of the 'secured creditor' or by issuance of a sale certificate by the 'authorized officer' as required under sub-rule (6) of Rule 9 of the rules. Till the sale is confirmed by the 'secured creditor' as required under the Rules, it cannot be said that there is a valid transfer of property within the meaning of sub-section (8) of Section 13.
15. No doubt the Supreme Court in Narandas Karsondas case held that issuance of sale certificate is a ministerial act. But, the Supreme Court in Arvind Kumar's case and Sagar Mahila Vidyalaya's case held that sale will be complete only when the property is transferred on confirmation of sale. If the borrower has been able to repay the dues of the secured creditor together with all costs, charges and expenses incurred at any time before the date of confirmation of sale by the secured creditor, then, in that event, the secured asset shall not be transferred by the secured creditor and no further steps be taken. This is the plain interpretation of the language employed in sub-section (8) of Section 13.
16. One of the basic principles of interpretation of statutes is to construe them according to plain literal and grammatical meaning of the words. If that is contrary to, or inconsistent with, any express intention or declared purpose of the Statute, or if it would involve any absurdity, repugnancy or inconsistency, the grammatical sense must then be modified, extended or abridged, so as to avoid such an inconvenience, but no further. The onus of showing that the words do not mean what they say lies heavily on the party who alleges it. He must advance something which clearly shows that the grammatical construction would be repugnant to the intention of the Act or lead to some manifest absurdity (See Craies on Statute Laws, Seventh ed. Pages 83-85). In the well known treatise -Principles of Statutory Interpretation by Justice G.P. Singh, the learned author has enunciated the same principle that the words of the Statute are first understood in their natural, ordinary or popular sense and phrases and sentences are construed according to their grammatical meaning, unless that leads to some absurdity or suggest the contrary (See Chapter - The Rule of Literal Construction -page 78-Ninth Ed.). In Jugualkishore Saraf v. M/s Raw Cotton Co. Ltd.8 S.R. Das, J (as his Lordship then was) said: "The cardinal rule of construction of statutes is to read the statute literally that is, by giving to the words used by the legislature their ordinary, natural and grammatical meaning. If, however, such a reading leads to absurdity and the words are susceptible of another meaning the Court may adopt the same. But if no such alternative construction is possible, the Court must adopt the ordinary rule of literal interpretation." The ordinary, natural and grammatical meaning of the phrase 'at any time before the date fixed' employed in sub-section (8) of Section 13 of the Act is clear that the Legislature has intended that the phrase has application both for 'sale' and 'transfer' and not exclusively for 'sale' only and application of the phrase to the exclusion of 'transfer' is contrary to the intendment of the Legislature. From the language employed in the section, it is not possible to read down any other alternative construction.
17. Assuming for argument sake that the phrase 'at any time before the date fixed' is relatable only to 'sale' and not 'transfer' even then it cannot be said that property would get transferred to the purchaser automatically after the bid was accepted by the authorized officer. The sale will be confirmed and the property would get transferred only when the sale is confirmed by the secured creditor as required under Rule 9(6) of the Rules and not by the authorized officer who conducts the auction proceedings and accepts the bid amount subject to confirmation by the secured creditor. The Legislature intended confirmation of sale by the 'secured creditor' and not by the 'authorized officer'.
18. We may also notice the definitions of the words 'sale' and 'transfer'. The words 'sale' and 'transfer' are not defined in the Act. Section 2(2) of the Securitization Act provides that words and expressions used and not defined in the Act but defined in the Indian Contract, 1872 (9 of 1872) or Transfer of Property Act, 1882 (4 of 1882) or the Companies Act, 1956 (1 of 1956) or the Securities and Exchange Board of India Act, 1992 (15 of 1992) shall have the same meanings respectively assigned to them in those Acts.
19. At the first instance, we may look into the dictionary meaning of the word 'sale' to understand what 'sale' actually constitute in common parlance. As per The New International Webster Comprehensive Dictionary Deluxe Encyclopedic 2003 Edn. Page 1109 the word 'sale' means: "The act of selling, the exchange or transfer of property for money or its equivalent. Wests Legal Thesaurus Dictionary by W William Startsky, page 674 -1985 defines: A contract in which the seller in consideration of the payment of promise of payment of a certain price by the buyer transfers title and possession of the thing sold to the buyer. Section 54 of the Transfer of Property Act, 1882 defines 'sale' to mean: "Transfer of ownership in exchange for a price paid or promised or part-paid and part-promised". Section 5 of Transfer of Property Act defines 'transfer of property' to mean an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself, and one or more other living persons; and 'to transfer property' is to perform such act. We may also look into the meaning of the word 'transfer'. Wests Legal Thesaurus Dictionary by W William Startsky, page 754 -1985 defines the word 'transfer': To convey or remove from place or person to another (transfer title). Deliver, assign, pass. According to the New International Webster Comprehensive Dictionary Deluxe Encyclopedic 2003 Edn. Page 1333 the word 'transfer' means: To make over possession of to another, the act of transferring or the state of being transferred, a delivery of title or property to another. Ramanath Aiyar's Law Lexicon, 1997 Edn. At page 1911 defines transfer: To convey, to make over from one to another, to remove. Document whereby one person transfers property, securities, or rights to another. Transfer, with its grammatical variations and cognate expressions, means to make an alienation inter vivos.
20. From the above definitions and dictionary meanings of 'sale' and 'transfer', it is seen that 'sale' is not complete unless the property for which price was paid is transferred to the buyer by a written proceeding. In the instant case, though the bid of the auction purchaser was accepted by the authorized officer on 31.3.2012, the payments made on 13.4.2012 were received subject to the outcome of the proceedings before the DRT, Visakhapatnam. While accepting the Demand Drafts for Rs.11.70 cores dated 12.4.2012 and Rs.1.80 crores dated 13.4.2012 sent by the appellant by letter dated 13.4.2012 addressed to the Authorized Officer, Dena Bank, Vijayawada the Authorized Officer, Dena Bank on the letter dated 13.4.2002 endorsed as under: "Acceptance of the D.D. towards the balance bid amount is subject to the outcome of S.A.139/2012 pending before the Hon'ble DRT, Vizag filed by M/s Sruthi Builders P. Ltd. challenging the sale proceedings held on 31.3.2012. Confirmation of sale shall also be only subject to the outcome of S.A.139/2012 before DRT, Vizag." Therefore, the acceptance of the bid amount is subject to the outcome of the proceedings before the DRT. Further, the acceptance of the bid of the auction purchaser by the authorized officer, as per the conditions of auction, is subject to the confirmation by the banks and the same does not constitute confirmation of sale by the secured creditor. S.No.8 of the Terms and Conditions of Sale stated in the tender notification dated 27.2.2012 reads as under: "8. Sale is subject to confirmation by the banks". In the letter dated 31.3.2002 addressed to the appellant declaring the appellant as the highest bidder, the authorized officers of the banks clearly stated thus: "...The sale shall be confirmed in the name of M/s India Finlease Securities Ltd. on payment of the entire bid amount subject to confirmation by the Bank." The appellant, therefore, from time to time is informed that the acceptance of bid or sale shall be subject to confirmation by the secured creditor. Therefore, the acceptance of the bid by the Authorized Officer on 31.3.2012, in our considered view, would not amount to confirmation of sale by the secured creditor. It is a mere acceptance of bid of the appellant by the authorized officer and not confirmation of sale by the secured creditor. The confirmation stated in Rule 9(2) and 9(4) of the Rules is the confirmation by the authorized officer and not the secured creditor i.e banks. Sub-rule (2) of Rule 9 clearly provides that sale shall be "subject to confirmation by the secured creditor". Only after compliance of sub-rule (4), the secured creditor has to confirm the sale. It is only on confirmation of sale by the secured creditor sub-rule (6) of Rule 9 comes into operation and the authorized officer is empowered to issue a certificate of sale of the immovable property in favour of the purchaser in the form given in Appendix V to the Rules and to handover the delivery and possession of the property. Unless these formalities are complete, though the sale may be confirmed by the authorized officer, the property does not vest in the auction purchaser. Property would get transferred only after sale was confirmed by the secured creditor and not by the authorized officer. In the present case, the secured creditor has not confirmed the sale and the cheques issued on 13.4.2012 were received subject to the outcome of the proceedings pending before the DRT. Further, in the document "Details of auction participants" dated 31.3.2012 signed by the Authorized Officers and the authorized signatory of the appellant, it is mentioned as follows: "The sale in favour of the highest bidder shall be confirmed on payment of the entire bid amount of Rs.1800.00 lakhs (Rupees Eighteen crores only) and the Bank reserves its right to cancel/modify the sale before confirmation of the same." 21. Therefore, it is clear that though the bid amount was accepted by the authorized officer, it does not amount to confirmation by the secured creditor and the bank has the right to cancel/modify the sale before confirmation of the same. The auction purchaser was under the impression that the moment it paid the total bid amount, it is deemed that the sale is confirmed. That is not the intention of the Legislature. The intention of the Legislature is that sale has to be confirmed specifically by the "secured creditor" and not by the "authorized officer". There is no dispute that neither the sale was confirmed by the secured creditor by issuing any written communication nor a certificate of sale was issued by the authorized officer as required under sub-rule (6) of Rule 9 of the Rules and delivery of possession of property was passed on to the auction purchaser. Therefore, the contention of the auction purchaser that since the balance amount of purchase price has been paid on or before the fifteenth day of confirmation of sale of the immovable property, it is deemed that the property vested in the auction purchaser has no merit. At the cost of repetition we may state that the confirmation of sale referred to in sub-rules (2) and (4) is the confirmation by the authorized officer and not by the secured creditor. Sub-rule (2) clearly mentions that the sale shall be confirmed in favour of the purchaser who has offered the highest sale price to the authorized officer and the same shall be subject to confirmation by the secured creditor. So long as the sale is not confirmed by the secured creditor, transfer of secured asset is not effected.
22. The learned counsel for the appellant placed reliance on the decisions of the Supreme Court in B.Arvind Kumar v. Government of India and Sagar Mahila Vidyalaya, Sagar vs. Pandit Sadhashivrao Harse to contend that once the sale is confirmed by the Court the sale becomes absolute and the auction purchaser has got a vested right in the property whether sale certificate is issued or not. It was also held that issuance of sale certificate is only a ministerial act evidencing the transaction of sale that has already taken place and the sale certificate does not require any registration. In B.Arvind Kumar vs. Government of India it was held: When a property is sold by public auction in pursuance of an order of the Court and the bid is accepted and the sale is confirmed by the Court in favour of the purchaser, the sale becomes absolute and the title vests in the purchaser. A sale certificate is issued to the purchaser only when the sale becomes absolute. The sale certificate is merely the evidence of such title. It is well settled that when an auction-purchaser derives title on confirmation of sale in his favour and a sale certificate is issued evidencing such sale and title, no other deed for transfer from the court is contemplated or required. In this case, the sale certificate itself was registered, though such a sale certificate issued by a court or an officer authorized by the court does not require registration." From the above, it is clear that an auction purchaser derives title on confirmation of sale only. Though the above case arises under the provisions of Transfer of Property Act and deals with lease, the proposition can be made applicable to the cases arising under the Securitization Act as well. Even according to the respondent-banks, a sale certificate is not required to be registered nor were the banks required to execute a registered sale deed after the sale was confirmed by the banks and merely a sale certificate was required to be issued. It is the appellant who is insisting for registration of a sale deed. In the case before the Supreme Court, the sale was confirmed by the Court in favour of the purchaser and a sale certificate was issued. Be that as it may, in the present case, though the appellant has become the highest bidder and paid the amount, the sale was not confirmed by the banks i.e. the secured creditor which is mandatory and a pre-condition as per the terms and conditions of tender notification. Therefore, in the absence of confirmation of sale by the banks, as required under Rule 9(6), the appellant derives no title to the property in question. It is only on confirmation of the sale by the respondent- banks the property vests in the appellant.
23. In Sagar Mahila Vidyalaya, Sagar v . Pandit Sadhashivrao Harse it was held: "It may be noted that once an order was made under Order XXI Rule 92 C.P.C. confirming the sale, the title of the auction purchaser related back to the date of sale as provided under section 65 C.P.C. The title in the property thereafter vests in the auction purchaser and not in the judgment debtor. The issue of sale certificate under Order XXI Rule 94 C.P.C in favour of the auction purchaser though mandatory but the granting of certificate is a ministerial act and not judicial. " In the above case also, the sale was confirmed by the Court and a sale certificate was issued. As already stated, in the present case, sale was not confirmed by the respondent-banks which is a pre-requisite as per the terms and conditions of the tender notification. Though the above decisions have no application to the facts of the present case but the Supreme Court categorically held that an auction purchaser derives title only on confirmation of the sale by the secured creditor.
24. In K. Chidambhara Manickam v. Shakeena the Court has not taken into consideration the ratio laid down by the Supreme Court in Arvind Kumar's case and Sagar Mahila Vidyalaya's case that only on confirmation of sale by the secured creditor, transfer would take place. In the view we have taken on the interpretation of sub-section(8) of Section 13 of the Act, we are unable to subscribe to the view taken by the Madras High Court that a borrower should approach the secured creditor or the authorized officer before the date fixed for sale and not after the sale. Even if the borrower has failed to redeem the property before the date fixed for sale, still the right of the borrower to redeem the property before the sale was confirmed by the secured creditor is not taken away. With great respect to the learned Judges, the Court has not correctly appreciated true implication of sub-section (8) of Section 13 of the Act. Further, in Manickam's case, a sale certificate was already issued and as such the Court has held that sale becomes complete and the property vests in the auction purchaser. In the instant case, the secured creditor has neither confirmed the sale nor issued any sale certificate. Therefore, the said decision has no application to the facts of the case.
25. In Manoj D. Kapasi's case following the decision of the Supreme Court in Mardia Chemicals Ltd., it was held that the right of redemption was a statutory right available to the borrower till the transfer took place. In Mardia Chemicals Ltd.'s case, the Supreme Court following the decision in Narandas case held that the mortgagor has a right to redeem until the sale was complete by registration in accordance with the provisions of the Registration Act. No doubt the requirement of registration is not necessary for the properties auctioned under the provisions of the Act as held by the Hon'ble Supreme Court in B. Arvind Kumar's case. But, in the instant case, the sale was not confirmed by the secured creditor and as per the decision of the Supreme Court in Arvind Kumar's case unless the sale is confirmed the property is not said to be transferred to the auction purchaser. Therefore, in any event, the right of the borrower to redeem the property is not taken away so long as the sale is not confirmed by the secured creditor.
26. As regards the contention that the proceedings initiated by the borrower before the DRT are without jurisdiction, needless to state that against the sale proceedings of the authorized officer, the borrower has a right to approach the DRT under Section 17 of the Act. In the instant case, as already held, the sale is not confirmed by the secured creditor and the borrower has approached the DRT on 3.4.2012 and the Tribunal issued directions giving liberty to the borrower to pay the amounts within five weeks which have been complied with by the borrower. Therefore, it cannot be said that the proceedings before the DRT are without jurisdiction. The DRT is well within its competence to take up the matter. Since we have dealt with the interpretation of sub-section (8) of Section 13 in extenso we are not inclined to deal with the issue of maintainability of the writ petition.
27. We, therefore, hold that under the Securitization Act, a borrower has the right to redeem the property under sub-section (8) of Section 13 of the Act at any time before the date the property is transferred to the auction purchaser by confirmation of sale by the secured creditor as required under sub-rule (6) of Rule 9 of the Rules. 28 . In the result, we find no merit in the appeal and it is accordingly dismissed. No costs. PINAKI CHANDRA GHOSE, ACJ VILAS V. AFZULPURKAR, J 12.9.2012